Litigation Funding

Does Litigation Funding Open the Floodgates of Litigation?

Litigation funding by third-party companies is just the latest idea to be accused by some insurance and business groups of "opening the floodgates of litigation." This platitude is meant to strike terror in the hearts of those who see themselves as guardians of the gates of justice. This commonplace saying is invariably used against some perceived expansion of legal rights, causes of action, or creative legal theories on behalf of ordinary citizens.

First, it is true that lawsuit funding by third-party companies enables claims to be pursued after all other financial avenues have been closed. These lawsuits, however, are judged to be strong, deserving lawsuits that are good investments. These plaintiff funding companies are not trying to lose their money; they invest in a particular lawsuit because they think it will win and be profitable for them. It would be foolish of them to finance frivolous lawsuits.

Justice Is Served

Second, where is the justice in preventing righteous claims from ever reaching court? If litigation funding enables a wronged person to have a chance to get money from a malicious or reckless defendant who harmed that person, who could argue against it? These are not "floodgates," but a legal system working well to properly serve innocent people who have been injured.

What outcry there has been has come from some attorneys, but mostly from insurance, business, and other groups that have a vested interest in seeing these plaintiffs curtailed. These groups are often the potential defendants in the cases that proceed because of litigation funding by third parties. If creating a level playing field is irresponsible, as the "floodgates" quotation implies, then the concept of justice is topsy-turvy.